Submitted by Orion
The Minister of Finance is quoted as saying at an impromptu press conference in the lobby of Scotiabank Broad Street recently:
When this recession hit Barbados, and (with it) the challenges in the financial sector, Barbados lost a tremendous amount of international business, and investment too . . . to the extent where our corporation tax revenues have dropped about $200 million dollars (a year). A lot of those allowances and claims which you see in the tax system – (and) a lot of other things which you see here in Barbados that (the Arthur administration) was able to do pre-2007 – were predicated on that amount of money being made available. “Once that money was not available – through no fault of our own . . . and that $200 million hole was blown in the corporate tax revenues, it made it extremely difficult to sustain all of these things.
While Mr. Sinckler has not lied, he has not told the whole truth, and sometimes that can be worse than lying.
Economist Ryan Straughn’s article “Who will put the genie back in the bottle”, gave Central Bank statistics up to the fiscal year ended 30th April 2012 and estimated figures up to December 2012. It is instructive to see up to date information.
The following charts show data taken from and verifiable at the Central Bank’s website, http://data.centralbank.org.bb/TermsOfUse.aspx – this time up to fiscal year ended 30th April 2016.
Of note from this data are:
1. The Arthur administration in every year spent less than it took in in revenue, leaving a surplus, (totalling $2.4 million), which went to assist with capital expenditure.
2. The DLP administration overspent its revenue by massive amounts, (totalling $4.1 billion) which had to be financed primarily by the Central Bank, increasing the national debt.
Of note from this data are:
1. In the fourteen years between 1994 and 2007, gross national debt increased by $2.01 billion from $1,375,859 to $3,386,053
2. ‘In the eight years between the years 2007 and 2015, gross national debt increased by $3.02 billion from $3,386,053 to $6,403,100
The DLP administration has always referred to the period between 1994 and 2007 as “times of plenty”. The Minister of Finance in the quote above seeks to perpetuate this notion. The truth is that the revenue of the DLP administration fell below that or the BLP administration in only three of the eight years under review, and not by large amounts either. The policy of reducing the wages bill, increasing taxation, removing personal allowances and dampening spending has clearly failed to improve the situation and the government appears to be out of ideas. The constant downgrades of the Barbados economy by the international rating agencies have been a damning appraisal of the government’s efforts and the resulting increase in the costs of external financing with every downgrade only makes the situation worse. The record levels of borrowing from the Central Bank and the NIS to fund the high levels of spending continue to be a major worry.
Some commentators have sought to blame the current high deficit on off budget spending by the previous administration being brought to book by the current administration, but I refer all to the article of Ryan Straughn of 13th February 2013 at:
He states in the section “General Information – Recording of Debt”
The reader should note that whenever government issues any debt security or acts as a guarantor for any of its statutory corporation the following usually happens. #1 Loans (Debentures & Treasury Notes) are secured on the Consolidated Fund and assets of the Government of Barbados. A sinking fund will be established by half-yearly appropriations out of the Consolidated Fund with accumulations of interest to enable the Debentures/Treasury Notes to be redeemed when they fall due. For Savings Bonds, there is usually no sinking fund provided to meet redemption of bonds surrendered or maturing and payment of principal and accrued interest are charged on demand on the Consolidated Fund.
What this means it that government always knows in advance what its level of debt service will be in future time periods. So any loan issued at any point in the past has already been recorded in the national debt outstanding irrespective of whether it was done above the line (on budget expenditure) or below the line (off budget expenditure). The Accountant General and the Debt Management section of the Central Bank both keep meticulous records of all government issued debt. I said all this to say this, when politicians make references to “bringing off-budget spending and debt on to the books” it suggests that the public servants in both the Accountant General’s office or the Central Bank have plotted to hide the true nature of the national debt situation. Nothing could be further from the truth and since these public servants can’t set the record straight themselves I hope this note helps to dispel that much repeated myth.
While some leeway can be given to the present administration because of the increasing cost of government and the loss of some offshore business, it is mainly its profligate spending and its refusal to deal with the issue over the entire period of its administration that has created our present debt trap and caused the lack of confidence that currently pervades the Barbados economic scene.
The graph on “Data (2) says it all. A picture of continuing recklessness and/or incompetence. Take your pick. Is there any indication in the first four months of the current year that there is any change for the better? What in that picture prompts the Prime Minister to say, “Good Friday is over and Easter has dawned for Barbados”?
“You can fool some of the people some of the time, but you can’t fool all the people all the time” and I will add “except those who wilfully ignore their common sense”. While the official opposition’s no confidence motion will fail in Parliament because of its numerical composition, if will succeed in the eyes of all who look objectively at the facts.